Reference no: EM132788230

Brandon, an individual, began business four years ago and has sold §1231 assets with $5,250 of losses within the last five years. Brandon owned each of the assets for several years. In the current year, Brandon sold the following business assets:

Asset                          Original Cost                Accumulated Depreciation         Gain/Loss
Machinery                  $30,000                            $7,000                           $10,000
Land                           40,000                               0                              20,000
Building                       90,000                             20,000                         (5,000)

Porblem 1: Assuming Brandon's marginal ordinary income tax rate is 32 percent, what effect do the gains and losses have on Brandon's tax liability? Use dividends and capital gains tax rates for reference.